Question: For the coming year, Rian Company wants
For the coming year, Rian Company wants to reduce its average production cycle to thirty days. If the target-ending inventory for 2015 is $61,000, what cost of goods sold will the company need to reach its goal?
2014 Selected Income Statement Items for Rian Company
Cash Sales ………... $298,000
Credit Sales ……… $672,000
Total Sales ………... $970,000
Cost of goods sold … $570,000
2013 & 2014 Selected Balance Sheet Accounts of Rian Company
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> Monica is the CFO of Cooking for Friends (CFF) and uses the pecking order hypothesis (POH) philosophy when she raises capital for company projects. Currently, she can borrow up to $600,000 from her bank at a rate of 8.5%, float a bond for $1,100,000 at a
> Given the income statement below for California Cement Company for 2013, and the sales forecast from Problem 2, prepare a pro forma income statement for CCC for 2014. California Cement Company Income Statement for 2013 Sales Revenue ………… ………… $22,923,000
> Ross Enterprises can raise capital from the following sources: Ross has a new project that has an estimated IRR of 12% but will require an investment of $200,000. Should Ross borrow the money and invest in the new project? Source of Funds Interest Ra
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> Roxy Broadcasting has an annual EBIT of $3,500,000 and a WACC of 14%. The current tax rate is 40%. Roxy will have the same EBIT forever. The company currently has debt of $6,250,000 with a cost of debt of 14%. Roxy will sell $12,500,000 more of debt and
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> Up-Front Bank is now offering a two-year discount loan for 10%. Working backwards, what are the available funds at the start of the loan and the implied balance at the end of the first year if the total lump sum repayment at the end of the second year is
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> 1. Complete the following table of cash collections for the months of July, August, and September. Use Table 12.1 as a model. 2. Complete the following table of cash outflows for the months of July, August, and September. 3. Complete the following monthl
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> Red Devil Investors has a success rate of one project for every four funded. Red Devil has an average loan period of two years and requires a portfolio return of 25%. If you borrow from Red Devil, what is your annual cost of capital?
> Atlantis Manufacturing, Inc. issues the following press release: “Atlantis Manufacturing will pay a quarterly dividend of $0.50 per share to record holders as of the 10th of this month on the 20th of this month.” This announcement was made on July 3, 201
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> In Problem 4, Dunder-Mifflin, Inc. hires an investment banker for the sale of the 600,000 bonds. The investment banker charges a fee of 2% on each bond sold. What is the cost of debt to DMI if the proceeds below are before the banker's fees are deducted?
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> Grey’s Pharmaceuticals has a new project that will require funding of $4 million. The company has decided to pursue an all-debt scenario. Grey’s has made an agreement with four lenders for the needed financing. These l
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> Explain how purchasing power parity determines the exchange rate between two currencies.
> What does it mean to nationalize a business? How can a domestic company minimize the risk of nationalization of its foreign operations?
> What are intellectual property rights? How have changes in technology impacted the ability to protect intellectual property rights?
> What effect can cultural differences have on the ownership structure of a foreign operation of a multinational business?
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> In a world of no taxes and no transaction costs is dividend policy relevant? Why or why not?
> How does a stock dividend differ from a cash dividend? Is one better than the other from the shareholder’s perspective?
> What does it mean to be a beneficiary owner of stock? Why would individuals find this ownership stake convenient?
> Why is a dividend reinvestment program attractive to a shareholder that plans on increasing his or her holdings in a company?
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> Explain why M&M Proposition I in a world of no taxes and no bankruptcy states that the firm's value does not depend on its capital structure.
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> What is asymmetric information? How does it affect the prioritization of financing sources under the pecking order hypothesis?
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> Ashman Motors is currently an all-equity firm. It has two million shares outstanding, selling for $43 per share. The company has a beta of 1.1, with the current risk-free rate at 3% and the market premium at 8%. The tax rate is 35% for the company. Ashma
> Why would one lender charge more for a loan to different borrowers? Why would two different lenders charge different rates to the same borrower?
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> What is the role of an investment bank in selling stock?
> What is the difference between an angel investor and a venture capitalist? What event do these investors want to see happen? Why?
> What is the difference between Chapter 7 and Chapter 11 bankruptcies? Why might Chapter 11 be better for claimants than Chapter 7?
> What does analyzing companies against their industry tell a finance manager or financial analyst?
> What does the P/E ratio tell an outsider about a company? Why might this ratio not provide very compelling evidence on the firm's performance?
> Leeward Sailboats is reviewing the following new boat line: At what adjusted WACCs will the company accept this project? Hint: Find the IRR of the project and use it as the maximum adjusted WACC for accepting the project. Year 0 Year 1 Year 2 Year 3
> What are solvency ratios? Which ratio would be of most interest to a banker considering a debt loan to a company? Why?
> What are liquidity ratios? Given an example of a liquidity ratio and how it helps evaluate a company’s performance or future performance from an outsider’s view.
> What are some potential pitfalls of poor short-term financial planning?
> What does analyzing a company against firms in other industries tell a financial manager or analyst?
